Relevant life vs personal life insurance

Both relevant life and personal life insurance provide financial protection if you die during the policy term, but they are set up and paid for in very different ways. The key difference is who pays the premiums and how tax is treated.

With personal life insurance, you take out the policy in your own name and pay the premiums from your taxed income. There is no corporation tax relief, and you receive no tax advantage on the payments. The cover is personal to you and remains in place as long as you keep paying for it.

With a relevant life policy, the policy is arranged and paid for by your limited company on your behalf. The business owns the policy, but you or your family are the beneficiaries through a trust. When the qualifying conditions are met, the premiums are usually treated as an allowable business expense and are not classed as a benefit in kind for you personally. Learn more about business expense eligibility and tax benefits of relevant life cover.

For many directors, this makes relevant life cover significantly more cost-effective. The same level of protection can often be provided at a lower overall cost once corporation tax and income tax are factored in. It also avoids using personal post-tax income to pay for life cover. You can see how the structure works in our setup guide or explore trust options for payout protection.

Key differences

• Payer: Personal life cover is paid by you; relevant life cover is paid by your company.
• Tax: Personal premiums come from post-tax income, while relevant life premiums are often deductible for corporation tax and not treated as a taxable benefit. See tax benefits for more detail.
• Trust: Relevant life policies are placed in a discretionary trust so any payout goes directly to your chosen beneficiaries, usually outside your estate for inheritance tax purposes. Read about trusts and relevant life policies.
• Portability: Personal cover continues wherever you work; relevant life cover is tied to your company and normally ends if you leave or close it. See what happens if you leave your company.

You can use our relevant life calculator to estimate potential premiums and compare the total cost against a personal life policy on a like-for-like basis. For further information, browse the FAQs or read our 12 key facts about relevant life insurance.